Taking aim at Japan's retail market

Global Finance, Jun 1997 by Shibata, Yoko

Many Western money managers in Tokyo already have asset management operations, albeit small ones, to pursue corporate pension funds. The thrust now is to get into investment trust funds for retail investors. Shaking corporate business loose from Japan's trust banks has been difficult. But Japanese individuals-unhappy with low yields, discouraged by the Tokyo market's stagnant performance, and distrusting how Japanese securities firms operate-ought to be an easy market. And foreign money managers are looking ahead to when Japanese corporations switch to employeedirected, defined contribution schemes like America's 401(k) plans.

Consequently, such foreign financial houses as Jardine Fleming, Invesco, Credit Suisse, Deutsche Morgan Grenfell, and Bankers Trust are busy combining their asset management arms with new investment trust fund management operations. If Merrill Lynch gets the license to manage and sell investment trust funds that it applied for in April, it will become the 16th foreign manager in Japan. It has already been deluged by calls from midsize and small Japanese brokerage firms interested in selling Merrill's USdollar money market fund. Merrill hopes that individuals who become accustomed to the money market fund will open cash management accounts in New York when foreign exchange is decontrolled next April.

What Japanese brokers fear most are the "wrap accounts," which include discretionary asset management, that US brokers offer wealthy individuals. Japanese brokers and bankers have been lining up to work as agents for Smith Barney's Tokyo branch, for instance-because they want to acquire expertise about wrap accounts. -Y.S.